Cost-cutting Strategies for Companies During Economic Downturn

As the economy of the United States continues its downward spiral, companies will continue to think of strategies to cost down on costs to keep themselves in the black, however costly it may seem. How is cost involved in the cost-cutting strategy of US companies? It is true that companies will always look for competitive ways to do business. But what are the factors that companies will ultimately be willing to sacrifice to stay afloat? And how long will these cost-cutting measures be kept as they continue to affect the economy? Companies in the United States, or anywhere else, will look for ways to keep their companies competitive.

But the word itself has drawn many and varied emotions in reaction to itself (John Cook & Paul Nyhan, 2004). Just what is meant by outsourcing (Cook & Nyhan, 2004)? Outsourcing, or off shoring in other circles, is the proclivity of companies in the United States to farm out the livelihood of “white-collar” workers to other countries (Linda Levine, 2005).

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The recipients of the “farmed-out” jobs would be companies outside of the United States (Levine, 2005). Outsourcing, or off shoring, can also apply to companies that move manufacturing activities, or “blue collar” work, to other countries (Levine, 2005).

Direct investment by foreign business concerns have always stirred up arguments on the national level (James Jackson, 2005). When foreign investments are made, the local states and communities jostle for the investments, while many residents in the area fear for their jobs, that these may be lost to outsourcing (Jackson, 2005). Why are US jobs getting shipped overseas? According to some research, the notion of cost often comes into play (Bruce Sundquist, 2005).

The history of outsourcing began with the economic recession that occurred in the United States during the 1980's (Levine, 2005).

As the recession progressed, majority of US companies began to center their business activities on the core of their company and farm out the subsidiaries to businesses in the United States (Levine, 2005). The concept of outsourcing business is not a novel or new business practice (Cook ; Nyhan, 2004). Companies have long adhered to practices of making automobiles in Mexico, plastic children's toys manufactured in Taiwan and clothing wear done in Malaysia (Cook & Nyhan, 2004). So in essence, outsourcing is viable options for businesses as the practice enhances the efficiency of companies in allocating resources (Cook & Nyhan, 2004).

It is an accepted concept that businesses should seek to lower operating expenditures to boost profits (Cook & Nyhan, 2004). Economists that support outsourcing even argue that this practice is just another form of trading with other countries (Honorable Greed, 2007), a line that is supported by President Bush's senior economic adviser, N. Gregory Mankiw (William Friedman). According to Mankiw (n. d. ), businesses in the United States have always shipped good here from abroad (Mankiw, n. d. ). But what is new is the export of services manufactured from outside the United States and delivered via Internet or over the telephone (Mankiw, n. d. ).

Traditionally, companies are established with a purpose of keeping costs down (Brian Boland ; Walter Block, 1997). In outsourcing jobs that would cost more in terms of paying employees, businesses ship the jobs abroad where the rate of labor costs just 10 percent of what it costs to manufacture the product in the United States (Sundquist, 2005). Goldman Sachs Asia Managing Director and Vice Chairman Professor Kenneth Courtis (Access My Library, 2008), further strengthened the notion that out sourcing is a sound business decision (Courtis, 2005).